This article considers how English-law financing for businesses in Iraq should coordinate Iraqi security documents with facility conditions and release mechanics. An English-law facility agreement sets the commercial terms, but it does not create effective security over assets located in Iraq. The lender’s protection depends on how Iraqi law treats each asset, the authority of the security provider and completion of local formalities, all of which affect first drawdown and the eventual release of collateral.
Iraq has no single secured transactions statute. The framework is drawn from the Civil Code No. 40 of 1951, which governs mortgages and possessory pledges; the Real Estate Registration Law No. 43 of 1971, under which real estate mortgages must be registered; the Commerce Law No. 30 of 1984 on commercial pledges; the Companies Law No. 21 of 1997, which governs corporate capacity and the recording of share pledges; and the Execution Law No. 45 of 1980 on enforcement. Sector rules and investment licence conditions may also restrict encumbrances.
Identifying the available collateral
The starting point is the ownership and legal classification of each proposed asset. Land, machinery, shares and receivables do not support the same form of security in Iraq. A borrower may operate an asset without owning it, particularly where equipment is leased or land is held under an investment allocation that restricts mortgage or transfer.
An Iraqi security review should examine title documents, existing encumbrances and restrictions on disposal. A contractual promise to grant security cannot cure a lack of ownership or override a legal prohibition. For project finance in Iraq, these findings should shape the financing structure before the facility agreement assumes that all proposed collateral is available.
Translating the structure into local documents
English-law structures often rely on a security trustee or agent and on broad descriptions of present and future secured obligations. Iraqi law does not recognise the trust as such, so the parties must establish who can validly hold each local security interest, whether that is each lender, a local agent or another arrangement, and who may act when lenders change or enforcement is needed.
Iraqi security documents must identify the secured obligations with enough certainty for the relevant legal form and registry practice. A reference to all liabilities under a changing set of finance documents should not be assumed effective without checking local requirements. Amendments, increases and transfers of the loan may require further documentation or re-registration.
Movable assets and practical limits
Security over movable assets is more difficult in Iraq than in many jurisdictions. A pledge of movables under the Civil Code traditionally requires possession to pass to the creditor or a custodian, which is impractical for operating equipment, and there is no general collateral registry for non-possessory security. Receivables may be assigned, but notice and acceptance requirements must be met to bind the debtor. Lenders should therefore weigh the practical value of movable security against the cost of putting it in place.
Funding conditions and registration evidence
Signing, notarisation and registration are separate events where the security form requires them. A mortgage over Iraqi real estate is not complete because the borrower has signed a foreign security undertaking; it must be executed and registered at the Real Estate Registration Directorate.
Facility conditions should distinguish documents available at signing from evidence obtainable only after filing or registration. If funding precedes completion, the lender should understand the exposure period and agree a workable remedy, such as a post-closing undertaking with a cash sweep or default trigger. A legal opinion speaks only at its date and cannot make a future filing effective retrospectively.
Repayment and release mechanics
Repayment under the facility and discharge of a local registration need coordination. The parties should identify who must sign the release, what evidence of repayment is required and which authority records the discharge. This is especially important where the original lender or agent has changed, because the registry will act on the documents it holds.
Release undertakings should address the sequence between receipt of funds and delivery of discharge documents, and distinguish partial asset releases from discharge of the whole obligation. Review of Iraqi corporate authority may be needed for replacement signatories and powers of attorney executed outside Iraq, which must be legalised before use. The lender should retain evidence that the encumbrance has actually been removed, since signed release documents may precede the registry’s entry.
Enforcement realities
Enforcing Iraqi security generally requires court or Execution Directorate involvement; private sale of mortgaged property is not usually available. Enforcement timelines can be long, and debtors may raise procedural challenges. Lenders should factor these realities into their credit assessment and consider complementary protections, such as offshore account control, guarantees from parent companies outside Iraq and contractual step-in rights, rather than relying on Iraqi security alone.
Conclusion & how Etihad Law Firm can help
Effective Iraqi security requires the facility timetable to accommodate local creation, registration and release procedures, and lenders to understand where Iraqi law limits what English-law documents assume.
As Iraq project finance lawyers for British companies, Etihad Law Firm advises lenders, borrowers and their English counsel on collateral analysis, Iraqi security documents, registration and release, and the qualifications that should be reflected in financing conditions when the debt or lender group changes.